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Nike Is Up 3.8% after Citigroup Calls It the ‘Best Idea for 2019’



Latest developments

On December 3, Nike (NKE) stock rose 3.8% after Citigroup analysts called it the “best idea for 2019.” According to TheStreet, Citigroup is of the opinion that Nike’s growth story, on a global basis, is intact. The stock also warrants a premium multiple, added Citigroup. Also, JPMorgan Chase increased its price target for NKE from $81.00 to $85.00.

Analysts’ 12-month average target price for NKE is $87.58, which reflects a potential 12.4% upside based on its December 3 stock price. Of the 37 analysts covering Nike stock, ~60% have given it “buy” ratings, another 35% have rated the stock as a “hold,” and about 5% have given it a “sell.”

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The way forward for Nike

As of December 3, Nike stock is up 24.6% year-to-date. Its international and Nike Direct businesses remain strong. Also, its performance in North America is showing signs of improvement.

Nike is focused on increasing revenue from international markets, especially China. In Greater China, Nike has witnessed double-digit revenue growth for 17 successive quarters.

In the first quarter of fiscal 2019, Nike’s international revenue growth was driven by a 20% revenue rise in Greater China. To further boost its business in the region, Nike has partnered with the Chinese multipurpose messaging service WeChat to grow the NikePlus subscriber base. Further, it has also connected NikePlus member accounts to Tmall accounts.

For growth in Indian markets, Nike has also started selling goods on Flipkart. Flipkart is one of India’s leading e-commerce platforms.

Nike’s management expects its overall revenue to rise 9% on a currency-neutral basis. However, unfavorable foreign exchange movements are likely to affect the company’s top line. Analysts expect sales growth of 7.1% to $9.16 billion in the second quarter. The company will report its fiscal 2019 second-quarter results on December 20.

For fiscal 2019, Nike’s management expects its revenue to come in at the lower end of the guided range due to unfavorable foreign exchange movements. It has guided for revenue growth in the high-single-digit range.


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